Bare Essentials: The Aldi Way Of Retailing

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Summary: Less is more: the ascetic culture of a low-cost retail giant
Review: This book is the untold inside story from a former executive of German retail discount giant Aldi. Some of the advices that I recall from the German edition are the following (they are all interrelated):

ASCETICISM AS A BASIC PRINCIPLE. This word is usually connected to people avoiding physical pleasures and comforts, esp. for religious reasons (e.g. monks). In this context, it's more focused on what you can do without: headquarters, external market study, management consultants, and highly complex information technology. Instead Aldi focuses on a simple price strategy (everyday-low-price), undifferentiated product assortment, and avoid luxury.

THRIFTINESS AS A GUIDING PRINCIPLE. Everybody's talking about cost consciousness, but at Aldi this is second nature. There's a continuous avoidance of unnecessary costs on all levels.

INTERNAL RECRUITING OF HIGH-LEVEL MANAGERS. This principle is also recognised in bestseller "Good to Great". It's also a strong signal to internal candidates that they can expect to be next in line ... so be patient, you're time will come. The principle makes sure that top-managers fit the company culture. The negative effect is that you occasionally will be lacking the fresh eyes from outside.

LIVE THE DECENTRALISED ORGANIZATIONAL CULTURE. Aldi believes that the most efficient enterprise exists, when the overall direction set by the central unit is clear and remainder of the decisions are left to the decentralized organization - closer to where the action is.

MAKE A VIRTUE OF A NECESSITY. Many firms focus on doing some things unusually well. That's not necessary. The best service is often just doing the obvious and necessary tasks in a simple way.

CONTINUOUS IMPROVEMENTS. Instead of believing in huge cost cutting exercises or grandiose concepts like business process reengineering, Aldi believes in all employees' ideas to reducing costs. They are close to day-to-day work and can best evaluate what needs to be done to continually make things simpler and less expensive. This idea is closer to the [Japanese] quality concept of continuous improvement (evolution) than any [American] management fads on cost reduction based on organizational revolutions or merger-mania.

STICK TO YOUR KNITTING. Do only what you can do really well. Retailers are to trade with consumers; producers are to produce. Don't diversify, stick to the core business. Concentration is important for efficiency.

NO PUBLIC APPEARANCES. The attitude is that the public information is useful only to the competition. The managers' self-manifestation won't bring any competitive advantage for Aldi. This principle probably only works, since it's a private company. In the brave new world of war for talent and capital, this attitude probably will have to be adjusted.

SIMPLICITY IN PRACTICE. Avoid strong central staff and a big headquarters. The practice in the line of business is much more important than any theoretical staff work. Line managers do all special tasks. Focus on lean organizational hierarchies, clear decision authority, clear targets, and simple execution.

If you want to understand some of these productivity principles by low-cost companies better, let me recommend that you also check out "Less is more" by Jason Jennings. The companies cited in that book are Ikea, Ryanair, The Warehouse, Nucor, etc.

Peter Leerskov,
MSc in International Business (Marketing & Management) and Graduate Diploma in E-business